What Tim Schafer’s Kickstarter Project COULD Mean

Posted this on Facebook and I figured it belonged here as well.

I’m very interested in this project of Tim Schafer’s.

Darius Kazemi makes some interesting points about it in this article: http://kotaku.com/5883769/lets-not-jump-to-conclusions-about-kickstarter+funded-games-just-yet/

What I wonder about is basically this. Tim Schafer can do this not because his game concept is brilliant—at this point he hasn’t publicly discussed a game concept at all, and the only available info on it is that it will belong to the half-forgotten point & click adventure genre that Schafer pioneered and I loved so.

Tim doesn’t have any accountability to the people who make this game, and he knows that. If he decides to take this money and do something else with it—or if something goes wrong and the game doesn’t get finished—the backers have little to no recourse, and he’s very up front about that.

The reason he can still do this is precisely because he’s Tim Schafer—he’s a well-known game industry auteur with a large body of existing work and a signature style. When Tim Schafer tells you he’s going to make an adventure game, you know exactly what you’re going to get. He’s very publicly associated with the project, so he knows full well that it would destroy his career if he ran off with the money.

So this doesn’t mean anything for young indies who are looking to crowd-source funding for their games. But it COULD.

What we need is an extension of the Kickstarter concept that doesn’t just allow you to fund a project, it also allows you to have a voice in the decisions made by the people working on that project. If I’ve provided 1/1000th of the money, then I should have 1/1000th of the vote.

Existing companies do this. They have private investors, and a board of directors that names a chairman and votes on critical issues for the company, and stand to make a profit if the company is successful. But this is an old system, and it’s based on the now-obsolete need to get all those voting bodies in a room together to make decisions.

We don’t need this anymore. What we need now are tools that allow online communities of thousands to make the same decisions that used to be made exclusively by board members in stuffy, cigar-smoke-filled conference rooms.

The technology is here. If we build the system to allow regular people to fund innovation on a small, out-of-pocket scale, just imagine the sort of innovations that will appear. You’ll be able to shell out $15 to fund a project just based on the quality of the idea—knowing that even if it isn’t a big name with a lot to lose helming the project, you still have the ability to make a difference and create the project you want.

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About Malgayne

Community Manager at Google. Formerly at Sourcebits, Spark Plug Games, Zynga, and Wowhead.com. I like chiptunes and hefeweizen.

13 thoughts on “What Tim Schafer’s Kickstarter Project COULD Mean

  1. Actually, the framework you describe already exists. Corporate law is founded on the idea that if you provide 1/1000th of the money, you get 1/1000th of the vote. Shareholder control is mandatory. Boards of directors aren’t. A board of directors is that body of people the shareholders have hired to shepherd the company. If shareholders don’t want to do so, they don’t have to, and they always have the power to override the board. The reality, as you may have guessed, is that most investors don’t WANT to exercise their control. In part this is because they don’t want to be bothered, and in part it’s because they generally don’t feel qualified.

    Similarly, there’s no reason under existing law that shareholder meetings have to happen in a physical place. Corporate voting takes place electronically all the time right now.

    1. The legal framework exists, to be sure. I think that the tools, though, are very poor—if they weren’t, I don’t think that Kickstarter would be as successful as it is. After all, if I could pay $15 to have 1/100,000th of the say in how a game was made, and easily express and track my opinions online, then why would I pay the same $15 and NOT get that?

      1. I agree that the tools are not there. On the other hand, I’m not so sure investors would behave as you seem to think. Before Kickstarter, your average investor gave money to a person (or soon-to-be person) in return for nothing more than the promise that it would be used for that investor’s good – as determined by said corporate entity. Kickstarter offered people the opportunity to give money to a person without even that promise. I’m not sure it should be read as evidence that investors want MORE control.

      2. It’s not control that I’m thinking about really—it’s accountability. I want to have some assurance that when I support a project, the project is going to turn out to be something I can support—that it won’t morph into something unrecognizable, and that I have clear recourse if the leader of the project attempts to take advantage of me.

        In the current system, for reasons perhaps you can elaborate on, doing this with small sums of money (like $15) isn’t considered viable. Why? Is it the paperwork?

      3. No, it’s a combination of democracy and the nature of shareholding. If you invest $15 and somebody else invests $150, their opinion (by default) counts 10 times as much as yours. So if YOU think the project has morphed into something unrecognizable, but Mr. $150 doesn’t, what is your recourse? You own 1 share of the company, and Mr. $150 owns 10. No matter how disgruntled you are, the democratic result is for Mr. $150 to control the direction of the company.

        Now suppose that instead of a single $150 investor there are ten other $15 investors. Each of you owns 1/11th of the company. In order to change the direction of the company, you need to get 5 other investors to agree with you as to what should be done. In practice, getting those other 5 people to agree with you that the project has “morphed into something unrecognizable” is often very difficult, which is why people don’t do it all that much. The prospect becomes even more difficult when you consider that at least one other investor probably LIKES the way the project is going, and will be actively campaigning to stop you getting the votes necessary to “ruin” it. The only “feature” of the system that guarantees this result is that of majority rule.

        But, you might say, why does accountability need to be control? Why can’t, for instance, you simply get your $15 back if you don’t like where things are going?

        The answer is that you can (it’s called a put option), but companies don’t like to give their investors that right. Consider it from the company’s standpoint. Suppose you want to raise $165 to create your dream game. You plan to break your current 100% ownership of the company into 11 pieces, each of which you will sell for $15.

        The standard investment agreement is, “You give me $15, and in return I give you a 1/11th share of the company, meaning you have 1 of the 11 votes to determine which way we go. If you don’t like the end product, you can either go fuck yourself, or sell your share to somebody who DOES like the end product – including, possibly, me.”

        What you are proposing is a deal that goes, “You give me $15, and in return I give you nothing but the promise to give you what you want. If you don’t like the end product, I owe you $15.”

        Which option would you, as somebody seeking money, prefer? Option 2 is attractive in some ways, but it leaves you wide open to getting to the end of the project and one (or all) of your investors suddenly deciding you owe them their money back (money which, presumably, you have already spent). Of course, assuming you’re trying to be honest, you will probably disagree with them that you didn’t deliver, and then it’s off to the courts to decide who’s right.

      4. I don’t mean to suggest the put option at all, I don’t think it’s particularly viable for cases like this.

        I think the success of Kickstarter suggests that people are willing to throw small amounts of money behind ideas they like. I think the former option sounds great–I’m willing to abide by majority rule, and be aware that people who have a larger stake are going to have more of a say than me. The question to me is, can we create a system that makes it easy to find investments like this online, make micro-investments, view the results of the project leader’s work in a meaningful way, and vote on critical decisions that affect the company–in a format that’s just as easy for 10,000 people as it is for 10?

        And why doesn’t such a thing exist already?

  2. Ahhhh. Well, that probably IS a result of the paperwork. When you donate to somebody’s Kickstarter (because that’s what it really is – you aren’t investing, you’re donating), you know fairly little about it. It actually isn’t legal to offer INVESTMENT opportunities to the public (and Kickstarter qualifies as an offer to the public by anybody’s definition, I think) on so little information. It was, once upon a time. And then the Great Depression happened, and people decided maybe that was a little TOO much “buyer beware.”

    Ever since the 1930s, if you want to sell shares (or any other investment opportunity) to the public, you have to file a document with the Securities and Exchange Commission describing what it is you do (and/or plan to do) and all of the risks that a reasonable investor would want to know about, and THEN the SEC, after reading this document, has to give you the thumbs-up that they agree you have done an adequate job of describing the risks. After that said document will become publicly available on the SEC’s website for the public to read.

    This is a fairly simple principle, really, but the mechanics are rather a pain. It would certainly be a significant obstacle to your average indy developer. In part this is because describing everything that can go wrong with your idea is just inherently difficult; in part it’s because you have to convince the SEC staff (who may or may not understand your idea) that you have described everything that can go wrong; in part it’s because once this document is out there, investors can sue you on the basis that it contains a material omission or misstatement of fact that, had said investor known upfront, would have changed his or her decision to invest.

    So … yeah, it’s the paperwork. But the effect of the paperwork is not to make small investments not-worthwhile directly. Because it is inherently difficult to describe everything that can go wrong with an idea when it IS just an idea, people who are looking for investors in ideas tend to get around this disclosure requirement by simply NOT offering shares to the public. If you’re only offering shares to a small, non-public group of people, you don’t have to tell them anything (the theory being that they will simply withhold their money until they feel you’ve told them enough). But of course, by definition, if you are only talking to a small group of people, each individual in that group will have to put up a sizable amount of cash.

    1. Interesting. It seems like this is the question that would need to be answered.

      How does the SEC define the difference between a public and a private offering? I wonder if there might be some way to get around that.

  3. For what it’s worth, I can’t think of an exemption off the top of my head. The central feature of the scheme you describe is offering shares to the unsophisticated public, and that is precisely what the full-disclosure scheme was aimed at.

  4. So basically you want to take the independence away from indies? As someone said above, you’re not investing you’re donating. As soon as other people are making your decisions for you it ceases to be your project, and I don’t think any independent developer would be willing to participate in that. If you want to start a company that is beholding to shareholders and/or the public there are ways of doing that. But crowd-funding was meant for small companies or individuals to get their visions made, their way, and to let the general public support their favorite individuals or small companies.

    1. Oh nonsense! There are plenty of vehicles in place for Indies to collect donations, Kickstarter included, without this idea. And most of them don’t work very well—for every successful indie project that gets funding, a million disappear into obscurity because indie developers can’t afford to work for free.

      Most people—myself included—aren’t willing to throw more than a few dollars at a stranger with no guarantees, no matter how good the quality of their idea is. What I’m trying to envision is an environment where I, as a potential donator, feel comfortable ponying up cash for a project even if it’s being run by someone I’ve never heard of, with no previous business experience.

      If I’m the sole financier of his project, then I have all the power—he signs a contract and if he skips out, I can afford to hire a lawyer or a collection agency to track him down and make sure he holds up his end of the bargain. If I’m a Kickstarter donator, he has all the power—he signs nothing, and if he chooses he can disappear with my money. I can’t afford to hire a lawyer to recoup a $15 investment.

      What I’m envisioning is a system where a company kind of like Kickstarter gives the guy with the idea a platform. Potential investors “donate” to a project they like. The Project Manager agrees to a boilerplate contract with the donation platform which makes the money conditional on some sort of performance on his part—if he tries to just disappear with the money, or funnel parts of it into his pocket, or just use it to create a product that’s totally unrelated to the one they said they would make, then the donators have recourse. Individual $15 donators might not have the ability to go after the guy who scammed him, but the platform for donation has deep enough pockets to take action.

      I’m not talking about crowd-sourcing the decision making. I’m talking about about protecting donators from scams.

      My brother and I are working on opening a bar, in Austin TX, for gamers (see http://pixelsbar.com). Right now we haven’t been able to fully fund the project, so we don’t have a location yet. Acquiring funding for something like this is very difficult—we have an awesome idea, but you don’t know me from Adam, and if you handed me $15 to try and make my dream a reality, what guarantee would you have that I wouldn’t just disappear? If the place went on to make billions of dollars, wouldn’t you want to get a check for $300 in the mail? If you have that option, wouldn’t you be more interested in shelling out the $15?

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